(ERTS) Electronic Arts Offers Harry Potter Magic

The new Harry Potter film may be the last from the series that you will catch on screen, but Electronic Arts Inc. (ERTS) and Warner Bros. Interactive Entertainment have ensured that the magic may still be experienced on your gaming devices.

Harry Potter and the Deathly Hallows – Part 2, the last of the Harry Potter series of video games from Electronic Arts, has already hit the markets on July 12 and is available in North American stores. The game will also have a digital presence through Origin, EA’s online service platform that aims to sell its downloadable titles directly to customers.

The game is developed by EA’s Bright Light studio and licensed by Warner Bros. Interactive Entertainment. The game is available in Microsoft Corp.’s (MSFT) Xbox 360, Sony Corp.’s (SNE) PlayStation3, Wii, Nintendo DS and Windows PC.

Recommendation

We believe Electronic Arts has a strong product pipeline for fiscal 2012 and beyond, which will drive its top-line growth going forward. We believe that high quality titles, an impressive product line, increasing online exposure, social games and portfolio diversification guarantee market share gains over the long term.

Recently, EA, in association with Criterion Games, came up with Burnout CRASH, the latest offering from the Burnout series. The game is expected to hit the markets in the fall of 2011.

Moreover, EA has significant exposure in the social gaming market, and recently teamed with Procter & Gamble Co.(PG) to feature the latter’s Bounty products in the social game, PlayfishRestaurantCity. Though the financial terms of the deal were not disclosed, we believe this association will enhance Electronic Arts’ RestaurantCitysocial game.

EA’s latest acquisition of PopCap Games strengthens its foothold in the  social and casual gaming arena and will likely provide healthy competition to Zynga, the company that dominates in the social and casual gaming market. Additionally, the acquisition of PopCap Games will be incrementally beneficial to EA in generating revenues through the high-margin digital segment in the long run.

However, cut throat competition from Activision Blizzard Inc. (ATVI) and Take-Two Interactive Software Inc. (TTWO) may act as headwinds going forward.

We have a Neutral recommendation on Electronic Arts over the long term (for the next 6 to 12 months). Currently, Electronic Arts has a Zacks #3 Rank, which implies a Hold rating in the short term.

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